How to survive a stock market crash

Editor's Rating

9.2

Robert J. Brown

Tips on surviving a stock market crash

Stock market crashes can happen at any moment. Look at 9/11: right before that first plane hit the building, no one knew that day was going to go as it did. (Of course, a lot worse things happened than the stock market plunging, but you get my drift.) So how can you survive a turndown, even if it’s this big? Read our tips.

Preparation is key

Recovering from a stock market crash when you’re in deep can be extremely difficult. The key is in the preparation. This preparation is embedded in your daily trading activities. Make sure you read these 4 tips closely before placing yur next trades.

1. Spread your risk

This is one of the most important rules in trading. Always spread your risk. Don’t put all your money in stock options. Explore commodities, currencies, and indices, too. The biggest losers are the ones that bet on 1 stock or other underlying asset. Big risks can lead to big wins, but they can also leave you with empty pockets pretty fast.

2. Buy in stages

Use equal amounts in every trading session and stick to that limit. People who have survived the biggest stock market crashes in history – yes, even the one in 1929 – have done this by mastering the art of moderation.

3. Don’t overdo it

Of course, if you feel good, and the stock market feels good, and you just have that gut feeling that this trade is going to be your ticket to financial freedom, you want to put it all on that trade. But don’t overdo it. Don’t touch that money that is actually meant for groceries and utility bills. Stick to what you can afford to lose.

Invest in put options

In a stock market crash, put options can be your ticket to some interesting wins. Just know when to go for put options.

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